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Posts Tagged ‘SNDA’

VISIONS Scout Run – 090510

Posted by mounddweller on September 5, 2010

All,

Happy Labor Day weekend!  I hope you all are enjoying the holiday.  I ran a VISIONS Scout screen this evening to see what might look good for the short trading week ahead.  The strong upward move last week produced a bumper crop of stocks meeting Ron’s criteria.   79 stocks have a Gold$ of 80 or better.  16 of these had a perfect Gold$ of 100.  A partial listing of the stocks found in Ron’s Scout Stocks to Buy report is embedded below.  Because of the large number of stocks on the list I had to limit it to the 38 having a Gold$ score of 90 or greater.

There are a number of stocks in the top 10 that caught my eye.  In particular I find XOM and WAG to be of interest.  Both are what I consider top-shelf, blue chip companies.  Both pay a moderate and growing dividend.    I already have a position in XOM.  I own shares, have sold CCs against those shares and also have open NP trades to acquire additional shares.  I am trading XOM using a strategy developed by my good friend Teddi over at www.fullyinformed.com.

I am interested in opening a position in WAG.  As I mentioned in my post from a couple weeks ago it is in recovery mode having fallen to a recent 52-wk low of $26.26.  I think it has great long-term growth prospects with the continued aging of the baby boomers.  It currently trades at less than 2x book value.  It has a dividend yield of 2.47% and a payout ratio of around 26% which means there is plenty of room for future dividend growth.

Other stocks in the top 10 that interest me are AEO, MRVL, and SNDA.  AEO is the retailer American Eagle.  Their target market is kids and young adults from 15-25.  They have an excellent balance sheet but I’m a little fearful of their near-term earnings potential.  Their target market has the highest unemployment rate of all in the US. 

MRVL is a high tech manufacturer of communications gear.  They too have an excellent balance sheet and trade at < 10x forward earnings.  SNDA is another Chinese online game stock.  You’ll recall I mentioned a couple of their competitors in my post two weeks ago. 

SNDA has over half of its market-cap sitting in cash on it’s balance sheet.  Thus, if you remove the cash from the calculation instead of trading at just over 13x forward earnings it is trading for about 6.5x forward earnings!  Dirt cheap! 

6 other stocks outside the top 10 also have Gold$ scores of 100.  They are: ADBE, SF, GPN, JNJ, GILD, and YHOO.  Of these I like JNJ and YHOO.  JNJ because it is the bluest of the blue-chips and is at an attractive price point.  YHOO because after all of the excitement about it being bought last year it has fallen off of everyone’s radar screen and is now plugging along in relative obscurity.

Hope everyone has a great week.  All of the big boys will be back on Wall Street after wrapping up their summer vacations in the Hamptons.  It will be interesting to see if they put their muscle behind power ing the market higher of if they decide to pull the plug based on the lousy economic data.

Regards,

Troy

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VISIONS Screen – 8/21

Posted by mounddweller on August 22, 2010

All,

I ran a VISIONS Scout screen this weekend after AUG expiration Friday.  Below are some highlights from what I found for specific stocks that looked particularly interesting to me.  However, before we jump into those I’ll tell you a little bit about the overall results of the scan.

The scan returned 32 stocks that met all of Ron’s “Level 4” criteria.  Of these 11 are what I’d call ‘investment grade’, i.e., they have a Gold$ greater than or equal to 80.  4 of the 11 have a perfect Gold$ score of 100.  The 11 ‘investment grade’ stocks are (Gold$):  PWRD (100), GHL (100), HAR (100), GAME (100), NVDA (82), SNDA (80), AMTD (80), SF(80), ADBE (80), WAG (80), and GPN (80).

Here are some details of the four stocks that have perfect Gold$ scores as well as one or two others that intrique me.

PWRD – Perfect World is a Chinese online gaming company.  They sell and manage several of the largest and most popular online role-playing games in China.  They have a market cap. of $1.25B.  They have no debt and over $250M in cash on their balance sheet (over $5/share).  Their P/E ratio is 8.5!  As one would expect with a software company they earn incredibly high returns on assets and on equity. 

The stock is currently trading near the lower leg of the VISION V.  Like all VISION selections it has fallen, hit bottom, and is now in recovery mode.  It hit a 52-wk high of $49.08 back in November of 2009.  It then fell hitting its 52-wk low of $20.79 in June.  Since then it has recovered, closing Friday at $24.99.  The SEP CCs at the $24, $25, and $26 strike price all look good.  The best choice of course is dependent on your guess as to the future direction of the market and your risk profile.

GHL – Greenhill & Company is an independent investment bank.  It has a market cap. of $2.13B.  They seem a little pricey having a P/E ratio of 33.  However, they have excellent operating margins.  They have around $33M in cash but over $55M in debt.  The stock hit a 52-wk high of $93.90 back in October before falling to around $61 in June.  It closed Friday at $72.20. 

I would pass on this one for a number of reasons.  First, I like to trade stocks that are less than $50.  Second, it has a very high P/E which in this shaky market means it could fall alot further before folks began to see it as a bargain and starting buying.  Third, while the amounts are modest, it does have more debt than cash on its books.  In this market and economy I’d rather stick with stocks that have zero net debt.

HAR – Harmen International Industries is a manufacturer of stereo equipment under various brand names including the famous Mark Levinson brand stereos found in Lexus automobiles.  It has a market cap. of $2.14B and a reasonable P/E of 13.65.  As one might expect in a highly competitive industry Harmen has thin margins and low rates of return on assets and equity.  However, they do have more cash than debt on their balance sheet and generate good free cashflow.

The stock peaked at $52.51 in April.  Its 52-wk low is $27.10 which it hit almost a year ago in August 2009.  It closed Friday at $30.71.   The SEP $30 call looks interesting at $1.75 bid.

GAME – Shanda Games Limited, like Perfect World is another Chinese online gaming company.  It has a market cap. of $2.02B and a P/E of 9.16.  Also like Perfect World, GAME has excellent operating margins and earns high rates of return on both assets and equity.  It has over $420M in cash vs. only around $2M in debt.

I like everything about Shanda except the stock price.  It is less than $10, having closed on Friday at $7.02.  Thus, when trading options you have little room to maneuver.  Worse yet, the Shanda options trade in increments of $2.50.  For these reasons I would pass on trading GAME.

That wraps up my discussion on the four top-rated VISION picks.  However, a couple of others further down the list of 11 caught my eye.  They are ADBE and WAG.

ADBE – Adobe Systems is one of the most recognized names on the planet in computer software.  It makes the ubiquitous Adobe Acrobat and pioneered the PDF document.  It has a market cap. of $14.66B and a relatively high P/E of  39.21.  However, it has a forward P/E of only 13.  It has good but not exceptional margins and about $1.15B in net cash.   It is trading at the lower leg of the VISION V having hit a 52-wk high of $37.86 last December and bottoming out in July at $26.34.  Friday it closed at $27.92.  The SEP $28 call at $0.88 looks interesting to me.  Ron prefers the OCT $28 or $29 strikes.  In this kind of market I prefer to stick with the near month.

WAG – Walgreens is a drugstore retailer.  It has a market cap. of  $27.69B and a reasonable P/E of 13.70.  Like most all retailers it has thin operating margins.  However, it does earn respectable returns on its assets and equity.  Its cash and debt are almost exactly equal and it generates strong cash flow.  The reason I’m interested in Walgreens is because I think it is a blue chip company with a solid dividend.  This is a company I wouldn’t mind owning for a good long time and now is a good time to establish a position.  It pays a small but growing dividend of $0.70/share.

Since hitting a 52-wk high of $39.66 in October it had fallen to a 52-wk low of $26.20 in July.  On Friday it closed at $28.45.  You could enter a position in WAG in several different ways.  You could do a buy/write and sell the JAN $30 or $31 strike.  This would allow you to make some capital gains and collect at least one dividend before facing the possibility of being called away in January.  Or, you could sell near-month put at either $27 or $28 and hope to be assigned on a pull back.

Hope you find all of this information interesting and useful.

Regards,

Troy

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